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[2017] ZAWCHC 80
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GPC Developments CC and Others v Uys (A71/2017) [2017] ZAWCHC 80; [2017] 4 All SA 14 (WCC) (15 August 2017)
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Certain
personal/private details of parties or witnesses have been
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IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
REPORTABLE
CASE
NO: A71/2017
In
the matter between:
GPC
DEVELOPMENTS
CC
First
Appellant
GERHARDT
PETRA JANSE VAN
VEUREN
Second
Appellant
CORRY
MARIA JANSE VAN
VEUREN
Third
Appellant
and
ERENS
JOHANNES
UYS
First
Respondent
(and
all those who hold title and/or occupy
Erf
[…] Bellville through him)
CITY
OF CAPE
TOWN
Second
Respondent
JUDGMENT
DELIVERED ON 15 AUGUST 2017
GAMBLE,
J:
INTRODUCTION
[1]
The subject matter of this appeal is a
residential dwelling located at […] B. Street, Loevenstein,
Bellville, (‘the
property”), which is known in the deeds
office as erf […] Bellville and is registered in the name of
the first appellant,
GPC Developments CC (“GPC”).
[2]
In April 2016 GPC approached this court on
motion for an order for the eviction of the first respondent (a
certain Mr Uys, to whom
I shall refer as “
the
purchaser”
), and all those
occupying under him, from the property. The application, which was
designed to restore possession of the property
to GPC, was supported
by the second and third appellants (Mr and Mrs van Veuren
respectively, to whom I shall collectively refer
as “
the
sellers”
), the erstwhile
registered members of GPC. As it happens, the sellers resided in a
neighbouring property located at […]
B. Street, Loevenstein.
[3]
The City of Cape Town was cited as a
co-respondent in the application by virtue of the provisions of s4 of
the Prevention of Illegal
Eviction From and Unlawful Occupation of
Land Act, 19 of1998 (“PIE”). It did not participate in
the proceedings at
any stage, was not affected by the judgment
granted in the court below and accordingly, nothing more needs be
said in that regard.
[4]
The application for eviction was dismissed
on 28 July 2016 by Nuku J, who granted leave to appeal to the Full
Bench on 24 October
2016. On appeal, as in the court
a
quo,
the sellers were represented by Ms
L Liebenberg and the purchaser by Mr JT Benade, both of the Cape Bar.
We are indebted to counsel
for their heads of argument and oral
submissions in this appeal.
THE
JULY 2012 DEED OF SALE
[5]
The matter turns on 2 written agreements
and some correspondence emanating from the parties’ erstwhile
attorneys. Firstly,
during the period 23 - 25 July 2012 the sellers
and the purchaser concluded a written deed of sale in terms whereof
the property
was effectively sold to the purchaser through the
disposal of the members’ interest in GPC. At the time the
sellers each
held 50% of such members’ interest and the deed of
sale made provision for the transfer of their entire interest (which
included
their loan accounts and any claims they held against GPC) to
the purchaser for a consideration of R2,8m on a date described in the
deed of sale as “
the effective
date”.
[6]
The effective date was, in reality, the
date when the purchase price had been paid in full to the sellers and
the members’
interest was legally capable of being transferred
to the purchaser. Occupation of the property, however, was almost
immediate:
it was agreed in the deed of sale to be 1 August 2012 and
by all accounts the purchaser so took occupation. The apparent reason
for this haste was because the sellers were in dire financial straits
at the time and facing an imminent sale in execution of the
property
after foreclosure of the bond by the mortgagee.
[7]
At
the time that the deed of sale was concluded there was a mortgage
bond registered over the property in favour of First Rand Bank
in the
amount of R1 832 000. The difference between this amount
and the purchase price was R968 000, which the parties
agreed
would be liquidated by the purchaser by the effective date at the
latest.
[1]
It was further agreed that the
extant
arrears
on the bond would be paid on signature of the agreement and would
serve as a deposit on the sale.
[8]
Although the deed of sale does not
expressly say so, it is reasonable to infer that the parties
contemplated that the purchaser
might finance the balance of the
purchase price through a mortgage loan which would be used to
liquidate the bond in favour of
First Rand Bank by the effective
date. Further, while the deed of sale is silent in that regard it
appears to have been an implied
(or tacit) term of the agreement that
the purchaser would be liable to pay the monthly instalments on the
bond as they fell due
until such time as the bond was settled in
full. This much appears from the affidavits filed in the eviction
application
[9]
At this juncture it is necessary only to
recite the provisions of clause 10 of the deed of sale, to which I
shall revert later.
“
10.
DEFAULT BY THE PRUCHASER
If the Purchaser commits a breach
of this Agreement and/or fails to comply with any of the provisions
thereof, then the Sellers
shall be entitled to give the Purchaser 10
(Ten) working days’ notice in writing to remedy such breach
and/or failure, and
if the Purchaser fails to comply with such
notice, then the Sellers shall forthwith be entitled but not obliged
without prejudice
to any other rights or remedies which the Sellers
may have in law, including the rights to claim damages:-
10.1 to cancel
this Agreement in which event the Purchasers (sic) shall at the
option of the Sellers and without prejudice to any
other rights which
the Sellers might have, either forfeit all monies paid to the Sellers
in terms hereof or alternatively be liable
to the Sellers for damages
in which case the Sellers shall be entitled to withhold any monies
repayable to the Purchasers (sic)
until their damages have been
determined and then apply set off against such damages.
10.2 in the
event of cancellation as contemplated in 10.1 above being caused by
default of the purchasers (sic), the purchasers
(sic) shall be
obliged to sign (sic) all of their members’ interest. For the
purpose of this sub-clause, the Purchasers (sic)
hereby irrevocably
and in rem suam authorise and empower the Sellers to perform all the
aforesaid acts and hereby ratify, allow
and confirm all and
whatsoever the Sellers may do by virtue hereof.
10.3 Immediately
(sic) to recover from the Purchasers (sic) all amounts (including the
balance of the purchase price together with
interest) payable to them
in terms of this contract.
10.4 In(sic)
either even (sic) the Sellers shall be entitled to claim damages from
the Purchaser as well as costs incurred as a
result of the breach, on
the scale as between attorney and client and collection charges.”
THE
ADDENDUM OF 6 AUGUST 2013
[10]
At
the beginning of August 2013 the outstanding liability of GPC under
the First Rand Bank bond had not been reduced at all, and
of the sum
of R968 000 which was then due to have been liquidated, only
R240 694.72 had been paid. Manifestly, transfer
of the members’
interest could not take place and the parties accordingly concluded
an addendum to the original deed of sale
in terms whereof the
purchase price was increased by R60 000 and a new arrangement
made for payment of the balance of the
amount then agreed to be due –
R787 305,28
[2]
- which, it was agreed, would be paid into the trust account of the
sellers’ erstwhile lawyers, VGV Attorneys.
[11]
The addendum is a comprehensive document
intended to address all unresolved issues relating to payment which
then existed between
the parties. It is unnecessary for the purposes
of this appeal to go into any detail regarding the terms of the
addendum other
than to refer to clauses 2.1 and 3 thereof which were
designed to address payment of the outstanding amount of R787 305.28,
the liquidation of the bond and the consequences of any failure to do
so.
“
2.
Payment of the balance.…
2.1 The amount
referred to above, being R787 305.28 … will
notwithstanding the terms of the Original Agreement be payable
into
the Trust account of VGV Attorneys below on receipt of the signed CK2
documents.
3.
Repayment
of FNB Mortgage Bond….
The Purchaser
herby (sic) indemnifies the Sellers against any liability with
regards to the aforementioned FNB (sic) Mortgage Bond
over the
property and undertakes to repay the bond or have the Sellers
formally released as sureties under such bond within no
more than 2
years from the 1
st
of August 2013. As security for such undertaking the Purchaser will
simultaneously herewith sign a form CK 2 transferring 100%
of the
members interest back to the Sellers as well as a session (sic) of
any credit members (sic) loan account. The aforesaid
documents are to
be held in safekeeping by VGV Attorneys until such time as the bond
has been settled or the Sellers have been
released from the
suretyship in favour of FNB relating to such mortgage bond. Should
FNB, however, at any stage hereafter call
upon either of the Sellers
to perform the obligations of the Close Corporation as mortgagor in
terms of the said mortgage bond
the Sellers shall notify the
Purchaser to immediately but by no later than 7 days after the date
of the notice to that effect provide
proof that it has settled all
outstanding obligations in terms of the mortgage bond as up to that
date. Should the Purchaser, however,
fail to comply with such notice
the Sellers shall be entitled to demand that they either be formally
released from the suretyships
by FNB within a further 21 days after
such period or be reinstated as members of the Close Corporation in
which event the said
attorneys are irrevocably authorised by the
parties to lodge the CK2 with CIPC. In the latter circumstance the
Sellers will be
obliged to repay to the purchaser the aforesaid
amount of R968 000.00 (Nine Hundred and Sixty Eight Thousand
Rand), less all
proven damages as suffered by the Sellers because of
the Purchaser’s breach of contract, including but not limited
to loss
of income from rentals, by no later than 31
st
of July 2015 plus interest on such amounts at the prime rate of
interest from the date that the members interest was registered
back
into the name of the Sellers until date of payment thereof.”
It
appears that the parties understood that the purchaser’s
obligation under cl 3 of the addendum “
to repay the bond”
included the obligation to pay the monthly instalments due thereon.
[12]
With reference to the terms of the original deed of sale, the parties
recorded as follows in the Addendum –
“
4.
No
further amendments
The parties confirm that the above
are the only amendment (sic) to the aforesaid agreements and that no
other amendments will be
of any effect unless reduced to writing.”
SUBSEQUENT
DEVELOPMENTS AND DEMANDS ISSUED BY THE SELLERS
[13]
It is common cause that –
·
the sum of R787 305.28 was paid to VGV
Attorneys during August 2013 in fulfillment of the provisions of cl
2.1 of the Addendum;
·
by October 2014 the bond had not been
liquidated; and
·
as at that date the Purchaser was in
arrears in terms of his obligation to pay the monthly instalment due
on the bond.
[14]
The failure on the part of the purchaser to liquidate the bond did
not
per se
afford the sellers a cause of action to cancel the
sale in October 2014: in terms of cl 3 of the addendum the purchaser
had until
31 July 2015 to settle the bond. Nevertheless, on 27
October 2014 attorneys Kellerman Hendrikse, then acting on behalf of
the sellers,
sent a detailed letter of demand to the purchaser. The
letter commences with a recital of the background facts and
circumstances
(as set out above) and continues as follows:
“
6. You
have fallen in arrears with the payment of the bond instalments due
to the bank. The bank is currently owed an amount of
R 47 000.
Despite demand you have failed to pay the outstanding balance on the
mortgage bond and caused the account to go into
arrears.
6(sic). The full outstanding
balance on the mortgage bond amounts to R47 000, 00 (
FORTY SEVEN
THOUSAND RAND AND ZERO CENT
).
7. We therefore demand payment to
the bank of the outstanding balance within seven days of receipt
hereof, and that you furnish
us with written proof that the payment
so demanded has been made, failing which our client will exercise the
election afforded
to them (sic) clause 3 of the addendum.”
[15]
The letter contains an obvious factual inaccuracy - the bond was in
arrears due to non-payment of the monthly instalments in
the sum of
R47 000 but this did not constitute “
the full
outstanding balance”
due on the bond, only the arrears.
Accordingly, the demand for payment of the full outstanding balance
(as opposed to arrears) was
baseless. In any event, as the Sellers
point out in the founding affidavit, further payments were made by
the purchaser to the
bank on 6 November 2014 and it would appear that
the arrears were thereby brought up to date.
[16]
On 10 December 2014 the same firm of attorneys delivered a further
written demand to the purchaser. In this letter it was alleged,
against the background similarly described above, as follows.
“
6. On the
27
th
of October 2014 we sent you a letter of demand informing you that you
have failed to meet your obligations in terms of the addendum.
7. In terms of a
letter of demand sent, our client (sic) demand (sic) from you that
you pay the outstanding bond instalments owed
to the FNB within seven
days after receipt thereof and furnish us with proof of the same.
8. In the event
that you fail (sic) to do so, our clients informed you of their
intention to exercise the election afforded to them
in terms of
clause 3 of the addendum.
9. On 6 November
2014 you did make a payment to the FNB for the earlier bond
instalments but it was not done within seven days.
10. You have
further fallen behind on Municipal rates and taxes and to date you
are in arrear (sic) to the amount of R 60 000.00.
11. You have
therefore failed to pay the outstanding bond instalments owed to the
bank within seven days, failed to provide our
client with proof
thereof within seven days and to date you are in arrears with the
payment of R60,000.00 in Municipal rates and
taxes.
12. Therefore
our clients hereby elect to exercise their rights afforded to them in
terms of clause 3 of the addendum and therefore
demand to be
reinstated as members of the close corporation within 21 days after
receipt hereof…..”
[17]
There was evidently no written reply to this letter but in the
founding affidavit the sellers say the following –
“
27. The
first respondent failed to bring the arrears (sic) rates and taxes
and utilities up to date.
28. The first
respondent also failed to comply with clause 3 of the addendum in
that he failed to repay the bond or have the members
released as
sureties under the bond by 1 August 2015
.
29. Above and
beyond the sending of the letters aforesaid, I remained in almost
constant contact with the first respondent relating
to the
non-performance of his obligations. Despite the fact that he was in
manifest breach of the agreement the first respondent
contended that
it was yet his intention to give full effect to the terms of the said
agreement.
30. In the hope
that this was not yet simply another dilatory tactic on his part I
instructed applicants’ current attorneys
of record, Messieurs
(sic) CK Attorneys, to address a final missive to the first
respondent putting him to terms to perform as
per the agreement, a
copy of which letter, dated 18 March 2016, is attached hereto….”
[18]
In argument before this court Ms Liebenberg confirmed that the letter
of 18 March 2016 was the demand upon which the sellers
relied in this
matter. It is therefore necessary to recite it in detail.
“
We
address you at the instance of our client, Mr and Mrs Janse van
Vuuren (sic) and GPC Developments CC. We have been handed
correspondence
addressed to you by Messers Kellerman & Hendrikse
Inc attorneys and have further taken instruction regarding certain
issues
outstanding between you and our clients.
From the content thereof it is
apparent that the relationship between you and our client, with
specific reference to the Memorandum
of Agreement of Sale dated 25
July 2012 (as amended) (‘the sale agreement’) has over
the last several months become
troubled, and the perfection of the
sale agreement has been unduly delayed.
It is our instruction,
notwithstanding your diverse breaches of the sale agreement to date,
that our clients yet wish to afford
you a last opportunity to restore
a more salubrious relationship and to give final effect to the terms
of the sale agreement.
We inform further that hereinafter
no latitude will be afforded as regards the enforcement of our
clients’ rights relating
to the sale agreement.
In the circumstances therefore and
in accordance with the terms of the sale agreement, and without any
derogation or waiver of our
clients’ existing rights, we
require as follows:
1.
Payment within 10 working days of
the full residue of the purchase price being an amount of (
vide
clause 3.1 as read with clause 1
of the addendum to the sale agreement);
2.
The provision within 10 working days
of a written indemnity in favour of Mr and Mrs Janse van Vuuren (sic)
against any liability
flowing from FNB mortgage bond…..(‘the
mortgage bond’).
3.
That you provide within 10 working
days written proof at the instance of First National Bank that the
full amount of the mortgage
bond has been repaid or that Mr and Mrs
Janse van Vuuren (sic) have been formally released as sureties under
such bond.
4.
We are further informed that you are
engaged upon illegal alterations to client’s property (as
specified at clause J to the
sale agreement) and have purported to
market same for sale. This constitutes conduct prohibited by clause
6.2 of the sale agreement
and you are called upon to desist with such
conduct immediately but at the very least by no later than 10 working
days hereof (sic)……
In the event you do not comply with
the requirements aforesaid then our clients will avail themselves of
all remedies pursuant to
your breach of the agreement, including but
not necessarily limited to the cancellation of same, your ejectment
from the property,
the retention of all monies already paid by you
and the recovery from you of the full balance of the purchase price
together with
interest…..”
[19]
In the founding affidavit it is said that the response to this letter
was a “
deafening silence”
and so on 12 April 2016
the same firm of attorneys wrote to the purchaser yet again,
purporting to cancel the agreement.
“
The
agreement entered into between you and our clients dated the 25
th
of July 2012 (as amended), as well as our letter dated 18 March 2016
refer.
On 18 March 2016 you were given a
final opportunity to regularise the relationship with our clients
pursuant to the non-performance
of the obligations in terms of the
agreement.
Despite such demand you have failed
utterly to comply with your obligations in terms of the agreement and
are accordingly in default
of same.
You are herewith informed that the
agreement between you and client is accordingly herewith cancelled
and you are called upon to
vacate our client’s property located
at […] B. Street, Bellville, Cape Town forthwith.
Kindly return the keys to the
property to our offices at the below address within twenty-four
hours.
Should you fail to so return the
keys we have instructions to Institute (sic) an application in the
Western Cape High Court for,
inter alia, your ejectment from the
property, the costs of which application will be for your account.”
INITIATION
OF LEGAL PROCEEDINGS
[20]
An application, in the long form, was launched a week later, seeking
only the eviction of the purchaser from the property and
costs on a
punitive scale. In the founding affidavit the relief sought was based
on the allegation that the occupation of the property
had become
unlawful in light of the purported lawful cancellation of the sale of
the members’ interest:
“
33. In
the circumstances on the 12
th
of April 2016 applicants’ attorneys of record dispatched to the
first respondent a letter reiterating that the agreement
between us
was cancelled and reiterating the call to vacate the property.”
[21]
In the answering affidavit the purchaser took 2 points. Firstly, the
locus standi
of the sellers to claim eviction was challenged
on the basis that they had effectively given up control of GPC to the
purchaser.
Secondly, it was said, the continued occupation of the
property by the purchaser was not unlawful.
[22]
The
locus standi
point was not dealt with in the judgment of
the court
a quo
and it is not clear whether it was argued in
that forum. Be that as it may, it was not a point raised on appeal.
The only issue
before this court was the question whether the
purchaser unlawfully occupied the property in April 2016.
[23]
In the answering affidavit the purchaser admitted that he was in
arrears with the payment of various amounts due under the
addendum.
He also admitted that GPC had been unable to secure cancellation of
the bond in favour of First Rand Bank or the substitution
of the
sellers’ suretyships in favour of the bank. The explanations
put up for these failures on the part of the purchaser
to comply with
the terms of the deed of sale and the addendum are not relevant to
this judgment. Suffice it to say that the purchaser
complained that
the property was generally in a poor condition and that he had
unexpectedly been required to spend vast amounts
to render it
habitable.
[24]
There was no factual or legal basis raised in the answering affidavit
in support of the bald allegation that the purchaser
was in lawful
occupation of the property notwithstanding the purported cancellation
by the sellers in early April 2016. The purchaser
said only that the
sellers had not availed themselves of the correct legal remedies
[3]
,
and went on to allege that he had already paid capital amounts
totaling R1 028 000 to the sellers. He complained that
the
sellers were endeavouring to recover return of the property and
forfeiture of all sums paid to them in circumstances where
they were
not permitted to do so. In the replying affidavit the sellers did not
dispute receipt of the of the said sum of R1 028 000
but
alleged that the terms of their agreement with the purchaser entitled
them to forfeiture of all amounts paid by him.
JUDGMENT
OF THE COURT
A QUO
[25]
In finding that the purchaser’s occupation was lawful Nuku J
considered the law relating to the cancellation of a contract
in
circumstances where the parties’ agreement sets out a specific
procedure to be followed when cancelling. The court made
the
following findings –
“
[21] The
agreement that was entered into between the second and third
applicants and the first respondent sets out the remedies
available
to the applicants in the event of default by the first respondent. In
particular, paragraph 3 of the Addendum provides
that where the first
respondent has failed to remedy the breach and the second and third
applicants elect to be re-instated as
members of the close
corporation, the second and third applicants are obliged to repay an
amount of R968 000.00…. to the
first respondent, less all
proven damages arising from the breach by the first respondent.
[22] In the
letter addressed to the first respondent dated 10 December 2014,
addressed by the second and third applicants, through
their then
attorneys Kellerman, Hendrikse Inc, the second and third applicants
made an election and demanded to be re-instated
as members of a close
corporation within 21 (twenty one) days after receipt of the said
letter. However, the second and third applicants
did not tender the
payment of the sum of R968 000.00…. as provided for in clause
3 of the addendum to the agreement.
[23] It is
therefore clear that in terminating the agreement, the second and
third applicants did not comply with the provisions
of the
termination clause, and as such, their termination is a nullity.
[24] As a result
of the purported termination by the second and third applicants being
a nullity, it follows that the first respondent
still has the right
to occupy the property until the agreement is properly cancelled in
terms of the procedure provided for in
the agreement.”
ARGUMENTS
ON APPEAL
[26]
Mr Benade unreservedly supported the finding of the Court
a quo
and impressed on this court that in the absence of a tender to
repay the sum of R968 000, the cancellation was a nullity. Ms
Liebenberg, on the other hand, submitted that since the cancellation
had been effected in terms of cl 10 of the deed of sale, no
tender by
the sellers was required and, further, that they were entitled to
retain all amounts paid by the purchaser in light of
the forfeiture
provisions contained in that clause.
[27]
Counsel were in agreement regarding the applicable legal principles.
In his judgment Nuku J relied on a passage in the 6
th
edition of
Christie.
The
following passage in the 7
th
edition
[4]
is to the same effect:
“
If the
contract lays down a procedure for cancellation, that procedure must
be followed or a purported cancellation will be ineffective.”
In
the later edition the author refers to
Bekker
[5]
,
Hand
[6]
and
Hano
Trading
[7]
in
support of the approach.
[28]
In
Bekker
Yekiso J, relying on the decision in
Godbold
[8]
,
held as follows:
[17] The purpose
of a notice requiring a purchaser to remedy a default is to inform
the recipient of that notice of what is required
of him or her in
order to avoid the consequences of default. It should be couched in
such terms as to leave him or her in no doubt
as to what is required,
or otherwise the notice will not be such as is contemplated in the
contract.
[29]
In
Godbold
[9]
the
learned judge cautioned as follows:
“
The
question for decision is always whether the conditions on which the
right to cancel was dependent have been fulfilled (
Rautenbach
v Venner
1928 TPD 26
at 31). The
purpose of such a notice is to inform the recipient of what is
required to do in order to avoid the consequences of
default, and if
it is in such terms as to leave him in doubt as to the details of
what he is required to do, then it may be that
it will be held that
the notice is not one such as is contemplated by the contract
(
Rautenbach’s
case,
supra
at
p 31)”
[30]
I understood Ms Liebenberg to accept that if cl 3 of the addendum was
the operative provision in this case, the sellers’
cancellation
was a nullity in light of the failure to tender repayment of the
amount of R968 000 to the purchaser. However,
counsel stressed
that the sellers had lawfully cancelled by relying on cl 10 of the
deed of sale. Her argument was founded on the
assertion that the
sellers had an option, upon default by the purchaser of his
obligations under the deed of sale (and in particular
the failure to
pay the outstanding balance due on the purchase price), to cancel
under cl 10 and, having exercised that election,
were not bound to
resort to the provisions of cl 3 of the addendum.
[31]
The argument raises two issues. The first is whether cl 10 of the
deed of sale survived the addendum with its own cancellation
provisions in cl 3, and, if so, whether the sellers unequivocally
relied on the former clause when purporting to cancel. Regarding
the
first leg, Ms Liebenberg relied on
Total
South Africa
[10]
in
support of the argument that the sellers were not required to
exercise an election in light of the fact that they were not
confronted
with two inconsistent remedies. In the event of the latter
situation, as Smalberger JA observed in
Total
South Africa,
the
approach was in accordance with the following
dictum
of
Beyers JA in
Montesse
Township
[11]
-
“
I am not
aware of any general proposition that a plaintiff who has two or more
remedies at his disposal must elect at a given point
of time which of
them he intends to pursue, and that, having elected one, he is taken
to have abandoned all others. Such a situation
might well arise where
the choice lies between two inconsistent remedies and the plaintiff
commits himself unequivocally to the
one or the other of them. That
is not the case here.”
[32]
The issues raised by Ms Liebenberg were not traversed in the papers
and it is not clear whether they were argued before Nuku
J, his
judgment being silent in that regard. Certainly, had the matter
proceeded by way of action with claims for cancellation,
damages,
forfeiture, conventional penalties and the like, the case would have
been properly pleaded and the parties, and the court,
would have
known where they stood. Be that as it may, in her written heads of
argument Ms Liebenberg submitted that it was common
cause that the
purchaser had breached cl 3 of the addendum. She went on to submit
that the sellers were therefore entitled to cancel
the agreement
utilizing cl 10, which she submitted was the only
lex commissoria
in either the deed of sale or the addendum permitting
cancellation in the event of breach. I did not understand the oral
argument
to be any different.
LEX
COMMISSORIA
[33]
A contractual term styled a
lex
commissoria
was
the subject of the discussion in
North
Vaal Mineral
[12]
:
“
Clause 9
is a
lex commissoria
(in the widest sense of a stipulation conferring a right to cancel
upon a breach of the contract to which it is appended, whether
it is
a contract of sale or any other contract). It confers a right (
viz
to cancel) upon the fulfillment
of a condition. The investigation whether the right to cancel came
into existence is purely an investigation
whether the condition, as
emerging from the language of the contract (a question of
interpretation), has in fact been fulfilled
(
Rautenbach
v Venner,
1928 TPD 26).
“
[34]
The term “
lex
commissoria”
has
acquired a somewhat flexible meaning in our law of contract.
Van
der Merwe et al
[13]
,
with
reference to
inter
alia
Nel
v
Cloete
[14]
,
observe
that the phrase denotes, primarily, a term which permits a
contracting party to resile from an agreement on the ground of
delay,
but that it has also acquired a wider and more general meaning,
viz,
a
stipulation conferring the right to cancel an agreement on the basis
of any recognised form of breach. Such a term may include
a right on
the part of the creditor to claim forfeiture of amounts already
received, but it is not limited to that right.
[15]
[35]
Christie
[16]
provides
the following useful synopsis in regard to a
lex
commissoria
:
“
The
contract may explicitly state that if one party fails to perform a
particular obligation by a specified time the other party
is entitled
to cancel the contract. In a lease where the landlord is given the
right to cancel for non-payment of rent, such a
provision it is
usually called a forfeiture clause, and in a contract of sale where
the seller is given the right to cancel for
non-payment of the
purchase price, a
lex
commissoria,
but either
description may be used in respect of any type of contract. Such
clauses are valid and enforceable strictly according
to their terms,
and the court has no equitable jurisdiction to relieve a debtor from
the automatic forfeiture resulting from such
a clause.
A clause fixing
a time for performance and stating that time is of the essence is a
forfeiture clause, and so is a clause prescribing
a time for
performance and giving the creditor the right to cancel after the
debtor has been given notice to rectify its default
within a further
prescribed time and has failed to do so, but not a clause which does
not place an unconditional unilateral obligation
on the debtor to
perform.”
(Footnotes omitted)
[36]
Applying the mandated approach to contractual interpretation, the
court is required to consider the language chosen by the
parties in
their agreement contextually against the background facts and
circumstances known to them and considered at the time
of conclusion
of the contract and give it its ordinary grammatical meaning. A
sensible and businesslike interpretation should be
sought provided it
does not violate the actual wording of the agreement.
[17]
[37]
I agree with Ms Liebenberg that cl 10 of the deed of sale constitutes
a classic
lex commissoria
in the sense discussed above. It
affords the sellers the right to cancel in the event of default on
the part of the purchaser after
the latter has been given notice to
remedy within 10 days and has failed to do so. In such event, the
sellers may claim, inter
alia, forfeiture of the amounts already paid
to them by the purchaser.
[38]
However, I do not agree with counsel’s submission that cl 10 is
the only
lex commissoria
available to the parties’ in
this matter
.
In my opinion, cl 3 of the
addendum falls into the same category as cl 10 and, indeed there can
be no reason in law why the parties
to a contractual arrangement
cannot agree on two (or more) terms which, independently of each
other might afford the contractants
rights of cancellation,
forfeiture and the like in defined circumstances
.
So, viewing the addendum in its contextual setting (which must
perforce include the terms of the deed of sale), we find the parties
amplifying, in August 2013, the terms of their earlier agreement by
the addition of very specific terms with defined obligations.
It
would seem that this became necessary by virtue of the fact that the
purchaser had not performed as anticipated a year earlier.
[39]
By all accounts, the situation which obtained when the addendum was
concluded might have afforded the sellers a right to rely
on cl 10 at
that stage and resile from the contract. But this did not happen: on
the contrary, the parties took positive steps
to keep the agreement
alive. Central to this was the liquidation of the bond by the
purchaser within a two year period and the
release of the sellers as
sureties for the obligations of GPC to the bank under the mortgage
loan. Significantly, cl 3 has its
own discreet breach provisions as
regards notice and includes a term which is the complete antithesis
of a forfeiture clause –
an obligation on the sellers to repay
the sum of R968 000 to the purchaser in defined circumstances.
[40]
For the purposes of argument I am prepared to agree with Ms
Liebenberg that the remedies available to the sellers were not
inconsistent. However, in the circumstances of this case, upon the
breach by the purchaser the sellers in fact made an election
to
pursue a particular remedy, and having done so they were bound by the
contractual terms implicit in that choice.
[18]
In
Baines
Motors
[19]
van
den Heever JA put it thus:
“
When the
purchaser has made default, the seller can elect whether or not he is
going to put the
lex commissoria
into operation (D.18.3.3). Once he has exercised his option he cannot
resile from that election (D.18.3.6.7; Voet [18.3.3]).”
CORRESPONDENCE
RELEVANT TO THE CANCELLATION
[41]
Turning to the correspondence sent to the purchaser by the sellers’
attorneys the following scenario emerges. On 27
October 2014 the
sellers’ attorneys informed the purchaser that he was “
in
arrears with the payment of the bond instalments due to the bank. The
bank is currently owed an amount of R47 000.”
This
obligation, as I have said, is not expressly contained in the deed of
sale, although it may have been an implied or tacit term.
But that is
neither here nor there.
[42]
The demand of 27 October 2014 was clearly based on the provisions of
cl 3 (in terms whereof the purchaser “
undertakes to pay the
bond…within no more than 2 years from the 1
st
of August 2015”),
because the purchaser was given seven
days to remedy the default. That is the remedial period referred in
cl 3, whereas cl 10 accords
a ten day period within which the
purchaser may cure his breach. In any event, the sellers in fact go
on to allege that in default
of payment by the purchaser, they will
exercise their election in accordance with cl 3. The fact that the
demand impermissibly
and erroneously seeks repayment of “
the
full outstanding balance on the mortgage bond”
at a stage
when it was not yet due was not a point taken by the purchaser at the
time or in the answering affidavit, probably because
the parties both
understood that the real basis for the demand was to procure
settlement of the arrears. The sellers accordingly
elected to address
the
extant
breach by the purchaser through the
lex
commissoria
contained in the addendum.
[43]
The demand of 10 December 2014 records that payment of the arrear
bond instalments demanded the previous month had been made,
although
outside of the prescribed 7 day period. The failure by the purchaser
to comply timeously with the demand clearly afforded
the sellers an
independent right to cancel. But there was a further complaint by the
sellers: the purchaser was in arrears with
the municipal rates and
taxes due on the property in the amount of R60 000. Once again,
the purchaser’s obligation to
pay the rates and taxes does not
appear
ex facie
the addendum. Nevertheless, reliance was
expressly placed by the sellers on the provisions of cl 3 thereof in
the December demand
–
“…
our
clients hereby elect to exercise their rights afforded to them in
terms of clause 3 of the addendum and therefore will demand
to be
reinstated as members of the close corporation within 21 days after
receipt hereof.”
[44]
Notwithstanding a clear election in December 2014 to demand their
reinstatement as members of GPC, the sellers took no further
legal
steps for some 15 months. As appears from para 18 above, the sellers
alleged that as of 18 March 2016 the purchaser had failed
to
·
bring the arrears referred to in the
December demand up to date;
·
settle the bond by 1 August 2015; or
·
secure the release of the sellers as
sureties for GPC.
[45]
Relying on these alleged breaches by the purchaser, the sellers
appear to have exercised a new election based on different
causes of
action arising from later breaches to the election purportedly
exercised in December 2014. Whether there was a purported
waiver of
that earlier election is not clear, but since the issue was not
properly ventilated in the papers it is not possible
to consider
whether, and how, to apply the principle referred to in
Bekazaku
[20]
-
“Once he has elected to pursue one remedy, he is bound by his
election and cannot resile from it without the consent of
the other.”
I
shall therefore assume, without deciding, that in March 2016 the
sellers were no longer bound by their election of December 2014.
[46]
When one considers the letter of demand of 18 March 2016 there is
little doubt that the sellers sought to rely at that stage
on
breaches by the purchaser of the provisions of cl 3 of the addendum –
·
The first numbered demand in the letter
claiming payment of the outstanding purchase price refers to cl 3.1
(read with cl 1) of
the addendum for purposes of the computation of
the amount due;
·
The request for indemnities in favour of
the sellers for their liability to the bank arises exclusively from
clause 3; and
·
The release of the sellers from their
suretyships is an obligation imposed on the purchaser exclusively by
clause 3.
[47]
Having opted to invoke the
lex commissoria
incorporated in cl
3 the sellers were therefore bound to observe the cancellation
requirements of that clause, which required a
tender to repay the sum
of R968 000 and did not permit a claim for forfeiture. It is
common cause that the letter of demand
did not comply with cl 3 of
the addendum and it must follow, in the circumstances, that the Court
a quo
was correct in finding that the cancellation was not
lawful.
CONCLUSION
[48]
In the result I would dismiss the appeal with costs.
_________________
GAMBLE,
J
DLODLO,
J:
I
agree and it is so ordered.
_________________
DLODLO,
J
FORTUIN,
J:
I
agree
_________________
FORTUIN,
J
[1]
A manuscript annotation to cl 4.1 of the deed of sale suggests that
the parties contemplated that the effective date would be 1
August
2013.
[2]
The sum is made up as to R968 000 + R60 000 - R240 694.72
= R787 305.28
[3]
“
12.1 die regshulp
hierin versoek, is nie die gepaste regshulp nie en is Applikante
veronderstel om die remedies waarvoorsiening
(sic) gemaak word in
die ooreenkoms wat ons aangegaan het, uit te oefen.
43.2
Tweedens, poog Applikante om my de (sic) eiendom te ontse, by wyse
van ‘n uitsettings aansoek, terwyl dit nie die regshulp
is
waarop hulle kan aanspraak maak nie en moes hulle, hulle verlaat het
op die remedies waarop in die ooreenkoms voorsiening
gemaak word..”
[4]
GB Bradfield
Christie’s
Law of Contract in South Africa (7
th
ed) at 637
[5]
Bekker v
Schmidt Bou-Ontwikkelings CC
2007(1)
SA 600 (C)
[6]
Standard
Bank of SA Ltd v Hand
2012(3)
SA 319 (GSJ)
[7]
Hano
Trading CC v JR 209 Investments (Pty) Ltd
2013(1)
SA 161 (SCA)
[8]
Godbold v Tomson
1970(1)
SA 61 (D)
[9]
At 65C
[10]
Total South Africa (Pty)
Ltd v Bekker NO
1992(1) SA
617 (A) at 626G – 627C
[11]
Montesse
Township and Investment Corporation (Pty) Ltd and Another v Gouws NO
and Another
1965(4) SA 373 (A) at 380
[12]
North Vaal Mineral Co.Ltd v
Lovasz
1961(3) SA 604 (T)
at 606C
[13]
Contract, General Principles (4
th
ed) at 299 fn126
[14]
1972(2) SA 150 (A) at 160
[15]
Baines Motors v Piek
1955
(1) SA 534
(A) at 542 - 7
[16]
Op cit
599
[17]
Dexgroup (Pty) Ltd v
Trustco Group International (Pty) Ltd
[2014] 1 All SA 375
(SCA) at [10]-[17];
Betterbridge
(Pty) Ltd v Masilo and Others NNO
2015
(2) SA 396
(GNP) at [8].
[18]
Bekazaku Properties (Pty)
Ltd v Pam Golding Properties (Pty) Ltd
1996(2)
SA 537 (C) at 542E-G
[19]
547C
[20]
542F